Behavioral models of irrational decision-making in the financial market
2020
The decision-making process within financial management requires continuous study and analysis. Classical theory is based on the decision-making process on the hypothesis of market efficiency on rational decision-making that brings effects that can be estimated by the law of probability. Rationality in the decision-making process is always classified as expected behavior. However, in practice, human behavior is not always rational and that is why it is the subject of continuous research. It means getting acquainted with human behavior, what they do, why they do something and what are the consequences of their work. In that sense, in relation to financial management and the decision-making process, a special discipline stands out, behavioral finance, which deals with the study of this process, irrationality in decision-making or the study of inadequate use of all relevant data that could affect rational decision-making.
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